Retail inflation at 7-month high of 3.05% in May, within RBI's comfort zone

Retail inflation spiked to a seven-month high of 3.05 per cent in May, remaining within the Reserve Bank of India’s (RBI's) comfort level, as kitchen items like vegetables, meat and fish turned dearer, government data showed on Wednesday.

The consumer price index- (CPI)-based retail inflation for April was revised marginally upwards to 2.99 per cent from the earlier estimate of 2.92 per cent, according to the data released by the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation.

Retail inflation stood at 4.87 per cent in May 2018.

The previous high was in October 2018, when the retail inflation print came in at 3.38 per cent. Vegetables prices witnessed a sharp rise in May at 5.46 per cent, as against 2.87 per cent in April 2019.

Prices of meat and fish went up by 8.12 per cent (from 7.55 per cent), while the inflation print for cereal and products rose to 1.24 per cent (from 1.17 per cent) in May this year.

However, prices of fruits continued to show a deflationary trend with prices falling by 5.17 per cent in May against 4.89 per cent in the preceding month. For fuel and light category, inflation stood at 2.48 per cent, as against 2.56 per cent in April.

Inflation for the overall food basket, based on consumer food price index, increased to 1.83 per cent in May, as against 1.10 per cent a month earlier, the data showed. “Given the delay in monsoon and sharp drought conditions in Maharashtra, the progress is important as food inflation has started to increase and can become sharp in case of specific crop failures especially pulses and oilseeds. Also horticulture becomes vulnerable to monsoon effects,” said Madan Sabnavis, chief economist at CARE Ratings. 

Retail inflation is a crucial data point, keenly watched by the Reserve Bank, while deciding its monetary policy.